Case Information
*1 Before B AUER , D IANE P. W OOD , and E VANS , Circuit Judges .
E VANS , Circuit Judge
. This insurаnce dispute leads us
into familiar territory—the question of who is responsible
for over $80 million in losses the Stone Container Corpora-
tion incurred when one of its pulp and paper plants ex-
ploded. This is the third time claims stemming from that
event hаve reached our court.
See Stone Container Corp. v.
Hartford Steam Boiler
, 165 F.3d 1157 (7th Cir. 1999);
Commonwealth Ins. Co. v. Stone Container Corp.
, 323
F.3d 507 (7th Cir. 2003) (
Stone 1
and
Stone 2
). In this case,
Stone argues that the “all-risk” insurance policy it pur-
chased from Industrial Risk Insurers (IRI) covers its losses.
Based upon an exclusion in the policy for ruptures of
pressure vessels, however, the district court grantеd IRI
summary judgment.
Like our previous forays into issues surrounding the plant explosion, this case, too, is but “a small part of a much larger dispute.” , 323 F.3d at 508. [1] Thus, before addressing the claims here, we briefly examine the history of Stone’s insurance coverage and thе litigation that preceded this case.
Stone manufactures paper products. It makes pulp in huge steel tanks called “pulp digesters.” Wood chips and chemicals are placed in the tank, which is then sealed and subjected tо heat and pressure from piped in steam. The chips then decompose into pulp fiber.
Between 1991 and 1993, Stone had property damage and business interruption insurance coverage in place for losses in excess of $20 million. Arkwright Mutuаl Insurance Company issued the single all-risk insurance policy, which included boiler and machinery (B&M) coverage.
Because of its poor loss history, however, in 1994 Stone was unable to purchase a similar all-risk policy. Specifi- cally, many insurers were not willing to write B&M cov- erage for the company. Thus, Stone had a patchwork of coverage. IRI and other “all-risk” insurers provided all-risk property insurance in the layer excess of $20 million, subject to a B&M exclusion. Hartford Steam Boiler (HSB) provided B&M coverage in that layer.
On April 13, 1994, a thin area of steel shell in one of Stone’s tanks ruptured. Within milliseconds, the tank exploded and launched a 28-ton piece of the tank over 200 feet. Besides much property damage, several workers were killed. The company incurred over $80 million of losses.
Following the loss, all-risk insurers—Commonwealth
Insurance Company, Hartford Fire Insurance Company,
Navigators Insurance Company, Employers Insurance of
Wausau, and New York Marine & General Insurance
Company—filed a lawsuit seeking a declaratory judgment
that thеir policies did not provide coverage. This suit was
dismissed without prejudice so that Stone could pursue an
action against HSB, whose policy covered “accidents to
objects,” including pressure vessels. There was, however, an
exclusion for explosions, which HSB relied on to deny cov-
erage. The district court granted Stone summary judgment,
holding that the event did not constitute an explosion.
Stone
Container Corp. v. Hartford Steam Boiler Inspection Co.
We reversed, finding that “[o]ne of the tanks in one of Stone’s plants exploded when a thin area of steel shell ruptured during the high-pressure operation of the tank.” , 165 F.3d at 1160 (emphasis added). We further noted that “it is the digester itself that, as a result of the rupture in its wall, blew up.” Id. at 1159-60. Thus, because Stone’s loss constituted an explosion of equipment other than the specially identified types of equipment covered against explosion by HSB, HSB’s policy did not cover the loss. Id. at 1160.
Our decision in Stone 1 led the all-risk insurers to rein- state their declaratory judgment action. Stone answered and asserted third-party claims against Aon Risk Services, Inc., its insurance broker, for breach of contract, negligence, and breach of fiduciary duty for failing to obtain adequate insurance coverage for Stone, and against IRI. The district court granted summary judgment fоr Aon on the ground that Stone’s claims were time-barred. We affirmed in Stone 2 .
The district court in this case granted summary judgment to IRI after concluding that its policy excluded coverage for losses based on the “rupture” of pressure vessels. Since the evidеnce established that the explosion and resulting damage was caused by a rupture, as we held in there was no coverage under the IRI policy.
Because this is a diversity case, we apply Illinois law. That law, with regard to interpreting insurancе policies, provides:
The primary objective in construing the language of the policy is to ascertain and give effect to the intentions of the parties as expressed in their agreement. If the terms of the policy are cleаr and unambiguous, they must be given their plain and ordinary meaning, but if the terms are susceptible to more than one meaning, they are considered ambiguous and will be construed strictly against the insurer who drafted the policy. Courts will not strain to find ambiguity in an insurance policy where none exists.
McKinney v. Allstate Insurance Co. , 188 Ill. 2d 493, 497 (1999) (internal citations omitted). Thus, our first task is to determine whether the language of the policy is ambiguous. Exclusion H of IRI’s C-AR (comprehensive all-risk) policy reads:
H. BOILER AND MACHINERY EXCLUSIONS— Unless endorsed hereon, this policy does not insure against:
1. exрlosion in or of the following property owned, op- erated or controlled by the Insured: steam boilers, including equipment attached to and forming a part thereof; steam turbines; steam engines; steam pipes interconnecting any of thе foregoing; or gas tur- bines; except that liability is specifically assumed for loss resulting from Explosion of accumulated gases or unconsumed fuel within the firebox (or the combustion chamber) of any fired vessel, other than gas turbines, or with the flues or pаssages which conduct the gases of combustion therefrom; 2. rupture, bursting, cracking, burning or bulging of . . . pressure vessels, including equipment at- tached to and forming a part thereof . . . .
* * *
nor does this policy insure against resulting dam- age to property causеd by such Occurrences except damage from a . . . combustion Explosion . . . .
We think the policy exclusion is unambiguous. “A policy
provision is ambiguous only if it is subject to more than one
reasonable interpretation.”
Lapham-Hickory Steel Corp. v.
Protection Mut.
,
This exclusion, moreover, is clearly applicable since
Stone’s losses were caused by a rupture. In , we
noted that “[o]ne of the tanks in one of Stone’s plants ex-
plodеd when a thin area of its steel shell
ruptured
during
the high-pressure operation of the tank.”
This does not, however, completely resolve the issue. The
rupture itself led to an explosion.
Stone 1
,
If Stone is correct, under H2, coverage would be excluded
for the damage the rupture caused, but under H1 the com-
pany could recover for the losses that resulted from the
explosion. Since the two oсcurrences happened virtually
simultaneously, within milliseconds, determining causation
and thus apportioning damages between the covered event
and the non-covered event would be extremely challenging.
At a minimum, we would be required to еxamine Illinois
law with regard to dual or concurrent causation.
See
Transamerica Ins. Co. v. South
,
Such an analysis is not necessary. The language of
Stone’s policy itself is clear. The last part of exclusion H2
states that the policy dоes not insure against “resulting
damage . . . caused by such Occurrences [rupture, bursting,
cracking, burning or bulging] except damage from a . . .
combustion Explosion . . . .” By its terms, then, the policy
excludes explosions (“damage”) that results from ruptures,
unless the resulting explоsion is a “combustion Explosion”
(which neither party claims this was).
[2]
Because the lan-
guage in exclusion H is unambiguous in barring coverage,
there is no need to examine any extrinsic evidence.
See
Alpine State Bank v. Ohio Cas. Ins. Co.
,
The district judge also properly granted IRI summary judgment on Stone’s claim that IRI violated the Illinois Consumer Fraud and Deceptive Business Practices Act, 18 ILCS 505/2, 505/10a. Stone claims that IRI misrepresented the scope of its insurance coverage in one of its publications and failed to disclose the gaр that existed between IRI’s and HSB’s insurance policies.
To begin, Stone cannot establish that IRI acted decep-
tively.
See Oliveira v. Amoco Oil Co.
,
Nor is there evidence that IRI issued the publication intending for Stone to rely on it to determine the scope of coverage. See id. Dobosz v. State Farm Fire & Cas. Co. , 120 Ill. App. 3d 674 (Ill. App. Ct. 2d Dist. 1983), cited by Stone, is not applicable. There, the court treated a brochure as part of the insurance contract betwеen the parties when State Farm’s agent sent Dobosz a copy of the company’s brochure and indicated that it described the available coverage. Id. at 677. The agent further told Dobosz it would take a long time to explain the policy itself and stated that the brochure showed what the policy covered. Id. Dobosz testified, moreover, that he relied on the brochure to indicate the risks against which his home would be insured. Id. In contrast, here, Stone is a large corporate entity which hired a professional corporate insurance broker. There is no evidence that IRI told Stone to depend on the publication, and Stone fails to establish that it relied on the brochure in lieu of, for example, reading the language of the insurance policy.
Finally, IRI did not have a duty to disclose the existence
of a gap in coverage to Stone.
See
,
e.g.
,
Nielson v. United
Servs. Auto. Ass’n
,
The judgment of the district court is A FFIRMED . A true Copy:
Teste:
________________________________ Clerk of the United States Court of Appeals for the Seventh Circuit USCA-02-C-0072—12-09-03
Notes
[1] Not only is this the third time we examine Stone’s explosion, but, we note, Stone’s suit against all-risk insurers Commonwealth Insurance Company, Hartford Fire Insurance Company, Naviga- tors Insurance Company, Employers Insurance of Wausau, and New York Marine & General Insurance Company remain before the district court.
[2] Stone argues that the term “damages” [sic] in this clause refers only to “money lost,” not resulting physical harm. This interpreta- tion is flawed. Stone ignores the exception to the exclusion for damage resulting from a “combustion Explosion.” By including this language, it is clear that under exclusion H an explosion, other than a combustion explosion, is considered a “resulting damage.”